SEVILLA, 30 May. (EUROPA PRESS) –
The General Director of Economy and Statistics of the Bank of Spain, Ángel Gavilán, has drawn attention this Monday to the increase in core inflation in the month of May, and has pointed out that the forecasts of his analysts lead to think of a probable revision downward in general inflation, which includes energy, but of a possible rise in core inflation compared to what they initially expected.
“The latest data, except for today’s, already made us think that we had to revise energy inflation downwards, and core inflation upwards”, commented Gavilán in Seville, where he answered questions about the current situation after presenting the supervisor’s ‘Annual Report 2021’.
Thus, it has indicated that this feeling that the calculations of the underlying would have to be adjusted have been reinforced by the advance data of the CPI for May released this Monday, which indicates that inflation rose 0.8% in May in relation to the previous month and increased its interannual rate four tenths, up to 8.7%, due to the rise in gasoline and food prices. Meanwhile, the underlying –without unprocessed food or energy products– increased half a point in May, to 4.9%, its highest value since October 1995.
In this regard, Gavilán has pointed out the contrast between the general inflation data, which could be revised downwards “by the Iberian mechanism” of energy that Spain and Portugal finalize with the European Commission, while the underlying one can follow the opposite path. “The underlying is the result of integration between economic agents. No government has an immediate capacity to act,” he said, before adding that “the dynamics we were seeing made us think upwards” of the underlying and after the data of this Monday, “maybe our forecast is higher than we had anticipated.”
Gavilán has added that “we will have to look very carefully” at the implications for monetary and fiscal policy during the “next few months”. Specifically, and in line with the second question, he pointed out that it will be especially necessary to see how it affects low-income households, “those who suffer the most”, indicating that it is not necessary to “compensate via tax cuts, but more directly through income tax”.